The Handbook of Technology and Innovation Management

7.1. Introduction

The selection of R&D projects has been recognized as an important problem since the 1950s and 1960s, and its importance has grown with intensifying global competition and accelerating technological change. Academics and practitioners have proposed hundreds of techniques to help managers decide which projects to fund. Yet despite the volume of proposed solutions, project selection has turned out to be an extremely difficult problem. A few selection techniques have become popular in industry, but none has proved wholly satisfactory.

Given this context of an unsolved managerial and academic problem, we develop a review of existing literature, a description of current managerial challenges, and a sketch of future research. The literature review begins by describing the major families of project selection techniques. We have included the techniques that attract significant attention in the academic literature, as well as those techniques that are common in practice. Each section comprises a brief explanation of the technique; a discussion of its strengths, weaknesses, and use in industry; and pointers to seminal papers, surveys, case studies, or other informative articles. The project selection problem can also be decomposed into two parts, which we examine separately: how to determine the value of individual projects, and how to choose a portfolio of projects that are optimal given the firm's objectives (Baker and Freeland, 1975; Winkofsky et al., 1980). These two ...